M&A and COVID: 'Tech is everything'

YARMOUTH, Maine - M&A analysts expect a busy fourth quarter, as changes brought on by the COVID-19 pandemic create stronger companies that are attractive to both buyers and investors.

In an industry that has traditionally lagged in its adoption of technology, HME companies have finally embraced all things digital, said Asim Akhtar, CEO and principal of Sullivan Health Holdings, during the panel discussion “The view from Wall Street: Wild cards in the fall” at the virtual HME News Business Summit, Sept. 15-17.

“Tech is everything and we have to be paced with the world at large, especially nowadays that everything is virtual,” he said. “It's huge when you go into a company and evaluate whether to acquire it. If someone has a robust IT system and everything is automated, without a lot of human interaction or errors, that's just going to drive the value up.”

A number of deals in the HME industry were announced just last week, with Spiro Health buying The Medical Store, National Seating & Mobility buying Travis Medical, and Rehab Medical buying Wheelchairs Plus.

Looking at the final quarter of 2020, analysts expect sustained activity, even with the wild cards of a continuing pandemic, an upcoming new round of Medicare's competitive bidding program, and a contentious election.

“With the potential change of presidency (and) change of tax, I think Q4 right now is going to be one of the busiest times for transactions,” said Ahktar. “If anyone's been on the fence about selling, this is the time because we don't know what could happen next year.”

Overall, however, the pandemic has done more to help than hurt the HME industry, highlighting its importance and resiliency, analysts say.

“I think the COVID situation just reinforces the value of the home and the community-based setting,” said Jonathan Hill, a managing director at TripleTree. “From a volume and patient perspective, there was a lull in the April-May timeframe, (but) when elective surgeries came back, we saw a rapid rebound in terms of patient volume and the overall health of the post-acute environment has rebounded quickly. With that has a come a significant increase in what we are expecting in terms of M&A activity.”